A.I.M. Users Bulletin Board

[ls7550]

Hi Toofuzzy

I wonder what would happen if the Fed bought bitcoin to put more money into the economy?

Gold is a tier 1 central bank reserve asset, same as the Dollar. Other assets are set to lower tiers, valued at x cents on (percentage of) the Dollar. IF Btc were included as part of reserves then its value would be deeply discounted. Central Bank acquiring $1Bn of gold is considered as $1Bn of reserves value. Central Bank acquiring $1Bn of Btc might be considered as $50M of reserves (5c on the $). I suspect the Fed is more inclined to sooner or later look to block Btc being used as legal tender. Most countries have limited coins/notes/gold that are considered as lawful, others are considered as illegal. Sooner or later pressures are likely to be directed towards companies accepting or paying in illegal currencies. At least in developed/stable economies. The greater scope for Btc is as a medium of exchange in volatile/unstable economies that more often have histories of repeated defaults. Even if it did rise to become accepted as a reserve currency then at the likely deeply discounted rate most wouldn't want to actually agree to it as settlement i.e. if two countries with deficit on one side, surplus on the other, the deficit side would be unlikely to agree to paying 20 times the amount via discounted Btc value (even though the surplus side might be happy to accept such if it were offered).

London used to do a lot of settlements via gold, where physical bars were moved from one cage (attributed to a country) to another. English being a predominant legal language also saw London being the hub for much of law, finance and accounting. If a country doesn't desire to manage all of the legalities/accounting/finance itself, where a misplaced comma or misspelt word in legal text could be devastating, it was more often deemed that experts in London would do all of those activities on behalf of the country.

Clive